The Treasury is expressing concerns over a potential loss of Sh133.5 billion in anticipated revenue for the ongoing financial year. This apprehension is attributed to a decline in imports of motor vehicles and fuel, as well as lower-than-expected sales of beer, spirits, and cosmetics.
According to the most recent budgetary outlook paper, the Treasury had set a target of Sh2.58 trillion for ordinary revenue, relying on projected tax receipts from the preceding fiscal year that concluded in June. However, the actual ordinary revenue from the previous financial year, inclusive of taxes, levies, rent from buildings, fines, and forfeitures, fell short by Sh104.3 billion compared to the estimates used as the basis for forecasting the current financial year’s receipts.
“Given this revenue shortfall, the projections for FY 2023/24 have an estimated revenue risk of Sh133.5 billion,” Treasury officials wrote in the 2023 Budget Review and Outlook Paper (BROP), whose final copy was published late Tuesday.
“Collections from the broad tax categories were below their respective targets in the period under review [FY 2022/23].”
The Kenya Revenue Authority imposes a duty of Sh134 per liter on beer, Sh229 on wine, and Sh335.30 on spirits like whisky and gin of equivalent capacity. These tax rates were last adjusted in the fiscal year concluding in June 2023. The William Ruto administration opted not to raise duties on alcohol and cigarettes for the current fiscal year, marking the first relief in five years.
This tax freeze for the sector follows vigorous lobbying by manufacturers. They cautioned that heightened taxes could not only diminish revenues but also contribute to an increase in illicit trade.